Fewer Sellers Choosing To Go FSBO

With the overabundance of real estate on the market in Pinellas County and elsewhere in Florida, it is amazing that some sellers still insist on being unrepresented in today's marketplace. Such sellers are, in fact, becoming more and more rare and put themselves at a competitive disadvantage as compared to sellers who choose to list with a real estate agent.

According to the National Association of Realtors (NAR), the number of for-sale-by-owner (FSBO) transactions dropped to 12 percent of total sales during 2006, down 6 percentage points from 1997.

NAR spokesman Walter Molony said property owners believe agents are far better equipped at marketing properties, thus achieving faster sales and obtaining higher prices in today's slow real estate markets. Molony added that the median price for agent-sold properties was about 16 percent higher than FSBO sales last year. Molony said that unrepresented sellers often lack the time and experience needed to complete such vital tasks as arranging property showings, coordinating required paperwork and identifying and following-up with qualified buyers.

The NAR 2006 Profile of Home Buyers And Sellers indicates that 5 percent of sales from mid-2005 to mid-2006 involved unrepresented sellers who turned to an agent, but only 1 percent of sales involved cases where sellers abandoned their agents and sold on their own.

For more information on buying and selling real estate in Pinellas County, visit my website at www.TheStPeteRealEstateSite.com.

-30-

What's A Home Improvement Worth These Days?

Every year, REMODELING Magazine in cooperation with REALTOR Magazine publishes its "Cost versus Value" report. Essentially, this report tells readers what a home remodeling project usually costs and what they can expect to recoup from that remodeling project when they sell. In other words, how much value did the remodeling project add to the property.

The report is broken down in a number of ways, but here is a synopsis of what it says for our part of the country.

Additions Job Cost Resale Value Cost Recouped
Bathroom $25,867 $21,084 81.5%
Family Room $62,797 $53,371 78.7%
Master Suite $84,883 $67,723 79.8%

Remodels
Bathroom $11,778 $10,226 86.8%
Kitchen $17,095 $15,238 89.1%
Home Office $18,504 $12,784 69.1%

Replacements
Roof $12,052 $10,025 83.2%
Vinyl Siding $ 8,285 $ 7,400 89.3%
Window (Wood) $ 9,974 $ 8,559 85.8%

Now, these are just a few examples. You can get the entire report broken out by city by going to www.CostvsValue.com.

For more information on what happening in real estate in the Tampa Bay area, visit my website at www.TheStPeteRealEstateSite.com.

-30-

Home Improvements You Might Not Think Of Doing

Take a walk through Home Depot or Lowe's and you see everything you need for almost any kind of home improvement -- kitchen, bathroom, family room, you name it they have it.

But what about some of today's not-so-common home improvements? Can Home Depot supply you with an automatic pin setter? Does Lowes carry leather theatre seating that rocks, swivels and has stereo speakers built into the armrests?

Sure, they have all the stuff for your traditional home remodeling projects such as bathrooms, kitchens and rec rooms. But what if you're looking for something a little more challenging?

Some Hot Remodeling Projects

Mention the word "rec room" and most people imagine a room containing a wet bar, pool table and kid's games spread out all over the floor. Not today. Today's rec room is the home fun center. In today's rec room you may find such improvements as bowling lanes, climbing walls and shooting galleries.

For example, United Bowling of Yulee, Florida will install a customized bowling lane in your home for a fee of from $19,000 to a super-duper version for $110,000. Who has a bowling alley in their home? Well, anyone who enjoys bowling but most are probably well-positioned people like football star Laveranues Coles or actress Sandra Bullock, both customers of United Bowling.
Enjoy wine? Collect rare bottles of it? A wine cellar may be just the home improvement you need. Not only can it be used to store an otherwise unruly collection of wines, but it will keep your wine at the proper temperature. It's an engaging showroom to display your collection. Expect to pay about $8,000 to $12,000 for a wine cellar design that will be sealed and climate controlled. If you want to add features like display lighting, mahogany shelving, stone arches and the like it can cost substantially more.

Is there a big tree in your back yard? Sure, you could build a deck around it. Or, you could build a treehouse for grown-ups. Now, this kind of treehouse is not something dad and the kids build on the weekend. We're talking about something much more sophisticated. Treehouses are now places for entertaining guests, relaxing in the evening and even serve as an out-of-the-ordinary home office. For today's treehouse, you'll need a designer with imagination and a contractor who loves a challenge. Oh, and you'll need to unlimber your checkbook. Some treehouses have been known to cost as much as $90,000.

Here's the other thing to keep in mind. Out-of-the-ordinary home improvements should be something you and your family enjoy while you own the house. They may not be improvements that necessarily add value to your home when selling. So, if you build them, do so because you enjoy them.

For more information on real estate in the Tampa Bay area, visit my website at www.TheStPeteRealEstateSite.com.

-30-

This Is The Kind Of Crud I've Come To Expect From The Insurance Industry

If you watch the international news and read a daily newspaper, you know of members of Congress who are now saying that they voted to support the war in Iraq because they were misled by faulty intelligence from the administration. The result? Thousands are dead, there are no weapons of mass destruction and the current war effort is costing the American taxpayers $1-million every 5 minutes according to a report I heard recently on TV.

Okay, blame it on bad information.

Well, property insurance companies may also be reacting to bad information which is causing insurance rates to be unnecessarily high.

According to information originally published by the Tampa Tribune, there is a company called Research Management Solutions (RMS) of Newark, California. This company developed and released a new computer model that projects a 40 percent increase in losses from hurricanes in Florida, the Gulf Coast and throughout the Southeast. This model has apparently contributed to significant increases in property insurance rates in coastal areas.

The thing is, RMS did not put the computer model out for peer review by outside experts before it was released to the insurance industry. The normal routine in peer review is to submit the material to various scientific journals and let editors and other experts review the material and raise questions about it. After that process has been completed, the material may then be published, but even then other scientists can have a shot at reviewing the published models.

Not submitting the model to peer review is just not how it is done. It is unethical. It's like an untested model that could be wrong and nobody really knows it's wrong. Kinda like the theory of weapons of mass destruction -- expect what is being destroyed here is your checkbook.

The RMS model is not yet approved for use by insurers in Florida, but it is being used by reinsurance companies that provide financial backing to Florida's insurance companies. Since they are using this data at the reinsurance companies, this is one of the items that is forcing Florida's insurance rates to go up and up and up. Remember, the cost of reinsurance is from 30 to 60 percent of permiums, according to the state.

In their defense, RMS is saying that they invited a group of respected scientists to review the model. This is called "expert elicitation". Here's what happened. They got a panel of four scientists together, invited them to meet in Bermuda and discussed the model. I'm no expert on peer review and I'm certainly not an ethicist, but I don't think that was much of a peer review session. Only four guys. An all-expense paid trip to Bermuda. How objective was the review session?

At any rate, this model is forming the basis for some very critical decisions about reinsurance rates. Ultimately, you're paying for those decisions through increased premiums which may -- and I stress the word may -- be being made based on a new and faulty hurricane model.

I wonder if anybody in Tallahassee is aware of this little matter as they sit down in special session?

For more information on real estate in Pinellas County, please visit my website at www.TheStPeteRealEstateSite.com.

-30-

December Sales Report -- Did You Feel The Earth Vibrate In Excitement?

America's greatest broadcast journalist, the late Edward R. Murrow, might have reported it this way ...

"Attention mister and missus America and all ships at sea. Did you feel the earth move at the end of December? Did you notice rivers suddenly reversing their courses? Did you see the sun rise in the west and set in the east? Do not be alarmed. These and other uncommon events were caused by last month's slight uptick in the real estate market in Pinellas County, Florida."

The absprption rate tells the tale pretty well. For single family homes, the absorption rate increased from 5.7% in November to 6.8% in December, an increase in inventory turn of 1.1%. For condos, the improvement was much more slight. The absorption rate incrased from 4.0% in November to 4.1% in December, an increase of just one-tenth of a percentage point -- but hey, it went up!

These improved absorption rates do not necessarily mean the market bottomed out in November and began the long road back to "normalcy" in December. December's absorption rates still make it the second worst month of the year and it may have been that November was so bad that the market had no place to go but up in December. Only time will tell on that issue. I'm just pleased to finally, after all these months, bring readers of this blog some good news. As Mary Potter of Tourtelot Brothers observed some days before the official figures were made available, "The wheel turned, if ever so slightly." Nice call, Mary.

So, what does this improved absorption rate really reflect? Let's do the numbers.

Single Family Homes. The number of single family homes listed in the Pinellas MLS system decreased from 10,262 in November to 9,876 in December. The number of single family homes sold increased from 586 in November to 672 in December. So, there are fewer homes on the market today than there were a month ago. Why? Well, some of it represents an increase in sales activity which is what we want to see. To be honest, some of it is probably caused by frustrated sellers who have lost patience with the market and have simply removed their property from the MLS system. Either way, the figures show that sales did indeed improve in December and that buyers now have fewer homes from which to select.

Condominium Sales. Condo sales were pretty much stagnant during December and condos continue to lag in the overall market. There were 6,497 condos listed during November, and at the end of December there were 6,444. There were 263 condos sold in November, and 264 sold during December. Those figures are virtually unchanged. Frankly, the condo market is really struggling. It's probably overbuilt and new ones seem to be popping up all the time. It's a great time to be a condo buyer; you can probably pretty much write your own ticket and a motivated seller will probably stamp it "accepted".

Median Prices. It's been an interesting twelve months from a median price viewpoint. High inventory and slow sales activity should mean that prices are dropping. That's Economics 101. That has happened to a certain extent, but sellers seem to be trying their best to keep prices higher than I expected. I guess it's part of that "soft landing" that economists have predicted for the nation's real estate industry. Anyway, the median price for a single family home in Pinellas fell from $268,000 at the start of the year to $212,500 in December, a drop of 20.7% if my math is right. For condos, the median fell from $177,500 to $156,000 at year's end, a drop of 12.1%. A lot of good real estate agents and appraisers who I know are predicting that prices will continue to fall at about the same rate into the early part of 2008. Of course, we'll have to wait and see if they are right.

America's other great broadcast journalist, Walter Cronkite, might summarize it this way: "What kind of year was it? A year like all years, filled with those events that alter and illuminate our time ... and you were there."

Well, good night from my little newsroom in St. Petersburg.

For more information on real estate in Pinellas County, Florida, please visit my website at www.TheStPeteRealEstateSite.com.

-30-

Predictions For 2007 -- Or, Boy I Hope This Crystal Ball Is Working Better

It's New Years' Day and, like many others, I took a few days off over the holidays. During that time I was fortunate to talk with a lot of people ... from golf pros to teachers, techies to truckers, waiters to bankers. Eventually every one of them asked me pretty much the same question: "What's going to happen with real estate next year?"

To be honest, my crystal ball is just a little cloudy right now. I think it's hard to say for certain what is going to happen in real estate during 2007. But since everybody is offering predictions, why shouldn't I?

Let me begin by saying this: I do not believe we have a true residential real estate problem. The problems that are manifest as real estate problems are actually taxation and insurance problems that have a negative effect on real estate. I believe that if you resolve the taxation and insurance problems, the so-called real estate problems will be resolved by ordinary market activity.

There are a lot of frustrated sellers in the market right now, and a lot of equally frustrated buyers. Resolving the taxation and insurance problems may ease their frustration levels to the point where they go back into the market and we have a return to something resembling normalcy. It would be great if that would take place during 2007.

Given the above position, my predictions for 2007 are actually a series of "If-Then" statements. I think that "If" one thing happens, "then" something else will naturally follow.

If the State of Florida and the various taxing authorities and municipalities in this state can bring property taxes to a level where people can afford to pay the taxes after purchasing new property, then I think real estate looks promising for 2007. This is something that is outside the realm of real estate. Tax policy is a political matter. If you want to make an impact on resolving the tax problems in Florida, let your elected officials know of your concerns and that you want this matter resolved, and resolved quickly.

If insurance executives at all levels can find a way to get control of rates so that people can afford to properly insure their property, then I think real estate looks promising for 2007. This, again, is a problem that is outside the realm of real estate to solve. It is vastly more complicated than most people appreciate and involves business matters, laws and regulations that few outside the insurance field can truly appreciate. At its core, I believe, is the question of profit. We need to find a way to obtain fair coverages and still allow insurance carriers to make a fair profit. On this matter, about all you can do is cross your fingers and hope that somebody proposes something that all parties find acceptable.

If mortgage rates remain affordable, then I think real estate looks promising for 2007. Right now, from the mortgage people I've talked with recently, mortgages should remain affordable. This is a good thing.

If demand stays high, then I think real estate looks promising for 2007. Demand is the engine that drives the real estate market. Mortgage rates are the fuel that power the engine. Both these items look good to me.

If inventory remains high, then I think real estate looks promising for 2007. Right now, there is a lot of real estate on the market. This gives buyers choices in housing that were not available in the last few years when inventories were pretty low. This high inventory gets buyers excited and should bring more buyers into the market and cause properties to sell more rapidly. Of course, that assumes that the tax and insurance problems can be overcome.

If people accept the "new normal" in real estate, then I think real estate looks promising for 2007. The "new normal"? This can most easily be defined as the public's acceptance of the way things are now as being the way they most likely will be for the forseeable future. People need to accept higher prices, higher taxes, higher insurance premiums and all the rest. This means they need to accept that housing costs will command a larger percentage of their income. Once that has been accepted, then things look good for real estate. If they don't accept it, frankly I see a continued slowdown.

Actually, I'm very optimistic that the problems will be resolved and that 2007 will be a great year for buyers and sellers of real estate. To a great extent, the problems we are faced with have political solutions. I think that politicians realize that voters have had enough of "playing politics" with people's wallets and futures. I think they will make the necessary compromises to resolve the problems so real estate can start moving forward again.

I think 2007 will be a great time to be a buyer, that there will be bargains to be had since inventories are so high and mortgage rates are so affordable. I think sellers will find a lot of frustrated buyers who want to buy new homes and income properties. Consequently, I think sellers will be able to obrtain fair market value -- and that's all sellers should really expect.

So, I think 2007 will be a good year in real estate. I'm optimistic about it.

For more information about real estate in Pinellas County, visit my website at www.TheStPeteRealEstateSite.com. And HAPPY NEW YEAR!